Rs 18.25 crore for one nursing home plot in Chandigarh, Rs 12.58 crore for its twin next door: the Supreme Court has held that a public authority can revisit an auction to maximise the price of public property, so long as no enforceable contract has been concluded.
New Delhi: Allowing the appeals against a Punjab and Haryana High Court judgment that had quashed the Chandigarh Administration’s cancellation of the highest bid for a nursing home site, along with the Agreement to Sell executed on it, the Supreme Court has held that the authority was entitled to revisit the auction to maximise price before a conveyance deed was executed, and has directed a fresh e-auction of the site within three months [Satinder Pal Singh and Others v. Bedi Hospital and Others].
The civil appeals, which arose from the High Court’s judgment of 1 April 2025, were decided by a Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe.
When a bid can be recalled
The Court looked at Rule 5 of the Chandigarh Estate Rules, 2007 and the e-auction terms. Read together, they empower the Estate Officer to withdraw any site put up for auction and to “accept or reject the highest bid without assigning any reason”. An Agreement to Sell under the Rules, the Court held, is not an enforceable contract under Section 2(h) of the Indian Contract Act, 1872. Such a contract arises only when the conveyance deed is executed.
“However, while dealing with matters relating to sale or lease of public property, the action of a public authority to recall or revisit the auction process would be justified if the decision is intended to maximise the price for the sale/lease of public property. This is permissible as long as the enforceable contract has not been entered into.”
There is only one restraint, the Court noted, and it comes from public law: the authority must not act arbitrarily or unreasonably. The decision to revisit was taken before any allotment letter or conveyance deed, so the Court held that “a substantial lower price fetched at the auction can be a relevant consideration for not finalising the contract in favour of a so-called ‘highest bidder'”. It found “no illegality or arbitrariness” in what the Administration did. It also recalled the observation in Chairman and Managing Director, SIPCOT v. Contromix Pvt. Ltd. that in the sale of public property the dominant consideration is to secure the best price, which is best achieved through maximum public participation.
Two sites, two bids, one cancellation
On 31 August 2022 the Chandigarh Administration issued an e-auction notice for 12 residential sites, one commercial site and two nursing home sites, all on a freehold basis. The two nursing home sites, Site No. 3 and Site No. 4 in Sector 33C, each measure 744.44 sq. yards and carried a reserve price of Rs 6.91 crore. On 20 October 2022, the appellant’s bid of Rs 18.25 crore was accepted for Site No. 3, and Bedi Hospital’s bid of Rs 12.58 crore was accepted for Site No. 4.
Bedi Hospital deposited 25 per cent of its bid on 21 October 2022 and was issued an Agreement to Sell on 28 October 2022. It paid the balance 75 per cent on 16 November 2022, but no allotment letter followed. On 11 January 2023 the Administration reconsidered and took the view that the bid for Site No. 4 did not reflect the market trend.
On 27 January 2023 it cancelled the bid contract, citing the Rs 6 crore gap with the adjacent site and its right under the terms to reject any bid without assigning reasons. The amount was refunded, Bedi Hospital was invited to join a fresh auction, and the Agreement to Sell was cancelled on 9 February 2023.
Bedi Hospital had already moved the High Court on 6 February 2023. On 10 February 2023 the High Court let the Administration hold a fresh auction but barred it from finalising the result. Bedi Hospital stayed out of the auction of 6 September 2023, in which the appellant was the highest bidder at Rs 18.30 crore. The High Court later allowed the writ petition and quashed the cancellation letters, and the Supreme Court directed status quo on the site on 18 August 2026.
Why the High Court’s authorities did not fit
The High Court had leaned on Vice-Chairman and Managing Director, CIDCO v. Shishir Realty. The Bench held that case inapplicable, as it involved a unilateral cancellation of lease deeds for alleged violations that were never found. Golden Food Products India v. State of Uttar Pradesh, where the allotment was cancelled without proper intimation, was distinguished as well. In the present case, the cancellation letter gave its reason, the full consideration was refunded on the same day, and Bedi Hospital was invited to participate in the fresh auction.
A fresh auction, and not the re-auction result
The Bench was critical of the High Court’s interim arrangement of permitting a fresh auction without staying the cancellation, which “opened up a second phase of litigation which has continued for more than two years”. It held the subsequent auction legal and valid, and noted that it fetched an additional Rs 6 crore. Asked about it, Bedi Hospital said it would match the appellant’s Rs 18.30 crore, but the appellant objected that it had paid in full and that Bedi Hospital had stayed out of the re-auction.
“Having considered the matter in detail and having reflected on the unfortunate situation that has been created due to the inconclusive interim arrangement made by the High Court, we are of the opinion that interests of justice and public purpose will be subserved if we direct the Chandigarh Administration to conduct a fresh e-auction of Site No. 4 after following the due procedure.”
The Administration must hold the fresh e-auction under the Chandigarh Estate Rules, 2007, and begin and finish it within three months. No order was made as to costs.
What the judgment settles
The sanctity of an auction gives way to the public interest in price, the Court has made clear. A bid that has been accepted, and even paid for, does not bind the authority until the conveyance deed is executed, provided the authority acts for a genuine reason such as a marked price gap, states that reason, refunds the money and keeps the fresh process open to all.
High Courts also get a caution: an interim permission to hold a fresh auction, without staying the cancellation, can create third-party rights and complicate the final decision.
Case Title: Satinder Pal Singh and Others v. Bedi Hospital and Others
Case Number: Civil Appeals arising out of Special Leave Petition (C) Nos. 33791 and 33793 of 2025
Bench: Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe, Supreme Court of India
Date of Judgment: October 16, 2026
Appearances: Guru Krishna Kumar, Senior Advocate, for the appellants; Vikramjit Banerjee, Additional Solicitor General, for the Chandigarh Administration; P.S. Patwalia, Senior Advocate, for Bedi Hospital